Arkansas has benefitted from natural gas boom

by The City Wire staff ([email protected]) 131 views 

The 4th annual Compass Conference, presented earlier today (April 12) at the Fort Smith Convention Center, focused on the impact of natural gas on the local and regional economy.

Paul Harvel, president and CEO of the Fort Smith Regional Chamber of Commerce, told attendees that while the natural gas industry was not publicly discussed as much as manufacturing and other large employers in the Fort Smith region, it had made its presence known.

"The largest industry we have in this community is an industry that sometimes we don't pay that much attention to because it's always here and it's always faithful and it's always stable and that's the oil and gas industry," he said.

A panel of three experts in the oil and gas industry, as well as an economist, told the crowd how the industry had not only changed, but how it will continue to evolve if the right actions are taken within the industry and within government.

Mike Callan, president of Arkansas Oklahoma Gas Corp., said the biggest challenge facing the industry and the nation today is the lack of a comprehensive energy plan.

"We've got the folks on the environmental side that want us to move entirely to renewables and we've got people on the other side who want us to continue to rely entirely on traditional fuels," he said. "This lack of a comprehensive energy policy or plan in the United States has put us where we are today where we still import a significant amount of our petroleum energy we use here to run the country."

Callan said the future growth of the industry, especially in the state of Arkansas, could be stifled should the government place too many regulations on the natural gas industry.

Luckily for Arkansas, the industry has been allowed to flourish due to the discovery of the Fayetteville Shale, according to Kelly Robbins, executive vice president of the Arkansas Independent Producers & Royalty Owners.

Robbins said in the last four years, more than $18 billion had been invested in the state of Arkansas due to natural gas exploration.

The exploration, he said, resulted in more than 3 billion cubic feet of natural gas produced in Arkansas on a daily basis.

"A billion cubic feet of natural gas – it will provide power for 3,600 TV sets to run non-stop for a century, it'll power 24,000 homes for a year, it'll give you enough fuel to go across our country on a road trip 84,000 times, or you could go to the moon and back 559 times," Robbins explained.

The oil and natural gas industry, Robbins said, was the basis of the Fort Smith economy and would continue to impact the local region, as well as the state, in a positive way.

"In Arkansas, the value of oil and natural gas that is produced is greater than that of cotton, rice and soy beans combined," he said. "We think of Arkansas as being an agriculture state, and we are and proudly so, but we produce some other great resources that are even more valuable and we don't hear a lot about them."

Due to the the growth in natural gas, Arkansans realized $1.1 billion in energy savings between 2010 and 2011, he said, adding that it has also proven to be environmentally friendly, dropping carbon levels to their lowest points since 1992.

Bill Hanna, president of Hanna Oil & Natural Gas, said a move to natural gas was logical given the need to keep costs low in industries such as transportation and manufacturing.

Hanna said with it being such a clean fuel, it actually would make sense for environmental groups to jump on the natural gas bandwagon.

"I always thought if the environmental groups decided that natural gas was the solution, and they claimed it as theirs, that would be great. I would love for that to happen and we could say, 'Good idea,'" he said.

Dr. Jeff Collins, a partner at Streetsmart Data Services and an economist who conducts the data collection and analysis for The Compass Report, said that in just the last four years, the Fayetteville Shale was responsible for creating between 11,000 and 12,000 jobs.

"It's hard to imagine a more transformative, almost serendipitous, event (for) the Arkansas economy," he said.

Due to the growth of the oil and natural gas industry, Collins said Arkansas has shielded from some of the more disastrous effects of the great recession.

But he cautioned that explosive growth in the industry would not last forever.

"There's certainly a lot of natural gas around and we seem to be finding new natural gas in places and there may be a lot more in Arkansas and we just haven't found it yet," Collins said. "But there is a shelf life to these sorts of bonanzas and the question is what you do with that revenue."

The revenue brought should be reinvested in all sorts of different projects, ranging from improved science and mathematics education to infrastructure, he said.

Callan echoed Collins' statement, saying that natural gas wells are "living and breathing and have a life."

He also said part of AOG's reinvestment was through conversion of many of the company's trucks to compressed natural gas (CNG).

Currently, Callan said the company had 60 of its 115 vehicles running on CNG.

He said the cost of converting a vehicle to run on CNG was about $8,500. To outfit a fueling station for CNG, he said the cost was nearly $600,000.

While the state of Oklahoma has nearly 70 CNG fueling stations, including enough along Interstate 40 for someone to travel entirely on CNG from Fort Smith to Oklahoma City, the state of Arkansas only has three stations, Callan said.

In order for CNG to gain traction, he said, the state will need to expand beyond the three CNG fueling stations in Damascus, Fort Smith and North Little Rock.

He pointed to private industry as being a leader in offering CNG to the masses.

Love's Travel Stores, Callan said, has installed many CNG fueling stations at its truck stops in Oklahoma in partnership with Oklahoma City-based Chesapeake Energy and he said Love's may expand the offerings to its truck stops in Arkansas and Texas in the near future.

The panelists concluded that the industry will not continue to see continued growth should the amount of government regulation increase.

Hanna said regulations should be within reason and not encroach on a private business's ability to operate and maintain a profit.

"We do need government help, we need everyone's support," he said. "But we don't need the government involved to the point where you really can't function and I don't know that we're there. I don't know, but it sometimes feels like we're there."